The price of college and the consequences of less funding

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Washington Monthly.

Can you explain the difference between the cost of college and the price of college?

The cost of college is how much it costs to educate a student. The price of college is what the students actually pay. That’s the tuition prices. Your cellphone that you have, it costs a certain amount for the company to produce. But then it was priced at a different level. So it’s a lot like that. One of the reasons that the price is lower at public higher education is because the state comes in and subsidizes. So it costs more to provide for and educate a student than what they pay in tuition. The difference is made up through the subsidy–the funding that the state provides. And so, as the state provides less funding, students and family have to pay more in tuition.

Where do states allocate the money they are no longer contributing to higher education?

Politically, a lot of state policy makers don’t want to raise taxes. Especially now with Republicans controlling a large share of state legislatures–and some states have super majorities in state legislatures. And so, politically, tax increases are largely a non-starter. One of the reasons for that is medicaid expenses. Medicaid expenses are a rolling part of the state budget, and that has had some effect on the money that is available for higher education. Also remember that higher education in state budgets is what’s known as a discretionary budget item. So what states generally do is go through and fund the items that they actually have to fund. There are certain things that states have to fund, and then after that, basically, they say: we’ve funded what we had to fund, and now, what do we fund with the money we have left? And so higher education has been referred to by scholars as the balancing wheel of state budgets. That means when states have less money, higher education is the first thing to cut. And when they have more money, they give more to higher education. But the trajectory is such that the cuts are often much deeper and much more frequent than the funding increases. And when you take that and you add in the enrollment increases, you have a situation where the per student funding has gone down pretty dramatically.

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